Bankruptcy can be a scary word, but it’s important to know that it’s a legal process designed to help individuals and businesses who are struggling with their debts. In this article, we will discuss everything you need to know about bankruptcy in Canada, with a focus on Toronto and Ontario.
What is Bankruptcy?
Bankruptcy is a legal process that allows individuals and businesses to eliminate or reduce their debts when they are unable to pay them. It is governed by federal law in Canada and administered by the Office of the Superintendent of Bankruptcy (OSB).
When someone declares bankruptcy, they are essentially handing over their assets to a trustee who will sell them to pay off their creditors. The trustee will also ensure that the debtor follows the rules of bankruptcy, such as attending credit counseling sessions.
Types of Bankruptcy
In Canada, there are two types of bankruptcy: personal bankruptcy and corporate bankruptcy. Personal bankruptcy is for individuals, while corporate bankruptcy is for businesses.
Personal Bankruptcy
Personal bankruptcy is a legal process that allows individuals to get a fresh start by eliminating or reducing their debts. To file for personal bankruptcy, you must owe at least $1,000 and be insolvent, meaning you are unable to pay your debts as they become due.
Once you file for personal bankruptcy, you will be required to attend credit counseling sessions and turn over your assets to a trustee. The trustee will then sell your assets to pay off your creditors.
Corporate Bankruptcy
Corporate bankruptcy is a legal process that allows businesses to get a fresh start by eliminating or reducing their debts. To file for corporate bankruptcy, a business must owe at least $1,000 and be insolvent.
Once a business files for bankruptcy, a trustee will take over and sell the business’s assets to pay off its creditors. If the business cannot be saved, it will be dissolved.
The Consequences of Bankruptcy
Bankruptcy is a serious decision that should not be taken lightly. It can have a number of consequences, both positive and negative.
The positive consequences of bankruptcy include:
- Getting a fresh start and eliminating or reducing your debts
- Stopping collection calls and wage garnishments
- Protecting your assets from creditors
- Putting a stop to legal proceedings
The negative consequences of bankruptcy include:
- Damaging your credit score
- Losing your assets
- Making it difficult to obtain credit in the future
- Being required to pay surplus income to the trustee
Bankruptcy can also have an emotional toll, as it can be a stressful and overwhelming process. It’s important to speak with a licensed insolvency trustee who can help you understand the consequences of bankruptcy and explore other options that may be available to you.
Conclusion
Bankruptcy is a legal process that can help individuals and businesses eliminate or reduce their debts. It’s important to understand the types of bankruptcy and the consequences before making a decision. If you are considering bankruptcy, it’s important to speak with a licensed insolvency trustee who can help you understand your options and make an informed decision. If you’re located in Toronto or Ontario, there are many licensed insolvency trustees available to assist you.